About Mike Doherty

Collaboration Kool-Aid

Posted on January 7, 2015 by Mike Doherty

Theories come easy. Robust models that work in the real world do not. – Mark Payne, Fahrenheit 212

Recently I was asked by a client to describe myself in one sentence. After pondering it, the client smiled when I answered:

“I’m equal part genius, equal part buffoon”.

And I really believe that – at least the buffoon part.

I’ve never been able to dance very well with conventional wisdom. For some unknown reason, I can’t seem to follow along. I’ve always had a healthy dose of skepticism for conventional wisdom – especially in supply chain planning.

Recently a client of mine challenged me on the conventional wisdom regarding demand planning collaboration. First off, a bit of background about my client – let’s call him Ken.

When it comes to demand planning collaboration, Ken has a significant advantage over me.

He has no experience.

Yup, he’s never designed or implemented anything regarding retail supply chain planning (Flowcasting or otherwise).

However, he does know retail. Cold. Ken is a smart dude and a quick study. He understands Flowcasting and its potential.

When we were talking and designing the demand planning process that will drive Flowcasting, the topic of collaboration came up. I did what any consultant would do and immediately offered Ken a large glass of Collaboration Kool-Aid.

After all, the conventional wisdom from every planning expert is that when it comes to demand planning, collaboration is king. Luckily Ken’s got a little buffoon in him too and he started to ask some pretty specific questions – questions that I’ve been pondering as well.

He pointed out that in a Flowcasting world, there is only one forecast – a time-phased forecast of sales to the consumer, by item, by store.

By his thinking a retail demand planner would be accountable for this forecast. And, of course, Flowcasting technology would generate the math forecast for possibly millions of store/item combinations. By his logic no collaboration would be necessary. I agreed.

But what about promotions and new items, I argued? Surely collaboration would be needed there and would improve the forecast. After all, it’s conventional wisdom. Then he floored me with the following, regarding demand planning collaboration:

Outline the specific steps each person would perform in the demand planning process
Prove that more people improve the process enough to warrant the extra effort

It was a difficult exercise and we both struggled to document, on a white board, actual steps different people would take that we believed would actually improve the process and resulting forecast.

After all, in a Flowcasting world, we are forecasting consumer demand. When it comes to promotions, a demand planner would use history to help predict demand. But, argued Ken, so would anyone else involved in the process (like a category leader or even a supplier).

And would their actual forecast really differ significantly from that of the demand planner, if they were unbiased and just trying to predict the sales? And, would their steps to arrive at the forecast be much different? If so, what would the steps be? I struggled. Started to babble. Then started to sweat. I couldn’t really come up with any significant difference. And you know what they say…”if 2 people in business always agree, then one of them is not necessary”.

After more debate, we ended up in the same place even for new items.

Our conclusion was completely the opposite of conventional wisdom – A single demand planner, accountable for the forecast, would produce as good a forecast as a team collaborating on it, with considerably less effort and a much simpler process.

If the demand planner wanted advice or input on a specific forecast, they would ask (possibly a category manager). But, we both agreed – that would happen very rarely. In terms of proving that having people collaborate on the forecast produces a better consumer demand forecast, there really is no documented proof. Only conventional wisdom, supported by an army of Kool-Aid drinkers.

Now I know what my long time colleagues and fellow self-anointed supply chain experts are thinking – wow, Ken really is a buffoon.

By the way, I happen to agree with him.

Guess that makes me a buffoon as well.

Told you so.

Recasting the Retail Supply Chain

Posted on December 20, 2014 by Mike Doherty

Here’s a great post from Shri Hariharan, JDA VP of Flowcasting regarding the new paradigm in retail supply chain planning. Click here to read.

Uniquely Unqualified

Posted on September 3, 2014 by Mike Doherty

Think back to the first microwave that your parents had and what are you likely to see? A rectangular box with three buttons (High, Medium, Low) and a timer dial. Now fast forward to today and what will you find?

As a comparison, one of LG’s more popular models has 33 buttons. What’s the difference between Auto Defrost or Express Defrost? And what happens when you press Less/More? Will any of these really make your popcorn pop faster or taste better? And it’s not easier to use.

Why do products become more complex as they evolve?

My view is that most organizations head down the path to complexity as a result of listening to – and putting faith in -people who are unqualified. Uniquely unqualified. And who are these folks? Most often, they are your customers and peers!
Customers? Peers? Uniquely unqualified?

Isn’t it the doctrine of good business to listen to your customers? And isn’t the customer always right? Nope and nope.

Consider Apple. They abhor customer focus groups. It’s in their DNA to not listen to their customer. After all, which customer suggested the iPod, or even the iPhone?
Ironically, listening to your customer is often the road to ruin. The issue is that there are too many of them. If you try to accommodate their collective wishes and suggestions, what you do get? 33 buttons on a microwave, that’s what.

It’s no secret that I think most planning solutions available in the market today are way too complex. Part of the problem is that many of them are fairly mature and they’ve done a great job, at least in their opinion, of listening to their customers over the years. People who are generally unqualified to suggest improvements.

Now, don’t get me wrong, I’m sure that good suggestions have come from customers. It’s just that very few companies from what I’ve seen have the courage to ignore the wishes of their customers and market forces and not include additional functionality.

Planning solution simplicity requires paring things away (or not adding them in the first place) when market forces tell you to add. It means removing layers rather than adding them. In short, it takes courage.

Since courage is largely lacking, most mature planning solutions in the market today are too complicated, too heavy and too burdensome. They are difficult to learn and implement, often requiring millions of dollars and years to realize benefits.

As a practitioner who helps companies implement these solutions it’s not hard to see where the uniquely unqualified come from. Most efforts to implement planning solutions are not grounded in fundamentals, or principles of the process.

Consultants and Solution teams focus on installing and configuring the software, rather than on configuring the way people think, so they understand the core principles of the new process.

And the result is telling. If people do not understand the key principles of the process, then they cannot think properly about the new solution. The result is that they mostly end up working hard to make the new solution act and behave like the current solution.

This is all they know because until they are educated and understand the principles of the new process, guess what? They are unqualified to implement the new approach. Uniquely unqualified.

It boils down to courage and the ability to say “no” in an effective manner. Solution providers need to resist the urge to add unneeded functionality, while helping to educate those requesting the “improvements”.

Similarly, consultants and implementers also need the courage to reject the idea of jury rigging the new solution to look like the old.

Can you say “no”? Are you qualified?

JDA Flowcasting website

Posted on May 22, 2014 by Mike Doherty

JDA has created an entire new website dedicated to Flowcasting. You can learn more about the concept, get a free eBook and watch some interesting videos that better explain how Flowcasting works.

Check it out at www.flowcasting.com

Which question are you asking

Posted on April 20, 2014 by Mike Doherty

Recently read an awesome book, A More Beautiful Question, about inquiring and asking more than telling. Should be required reading for everyone. Got me thinking though…

Most of the advice and thinking about supply chain planning (i.e., demand & supply planning) is about developing and applying new forms of advanced analytics to the wrong question.

My advice: find a better question! Then you’ll realize you should never forecast what you can calculate!

Repurposed

Posted on March 18, 2014 by Mike Doherty

It’s 1946 and a young Lee Iacocca finishes engineering school and joins Ford Motor Company – at the time, one the most prestigious companies in the world. Lee brings countless suggestions and ideas to his boss, only to hear that same question asked. ”Where has that worked before?”

Undaunted, Lee finds out.

Iacocca learned from his boss a fundamental lesson: if an idea is truly innovative, you’ll find examples of its successful implementation scattered throughout history. The secret to successful innovation is to import a tested and reliable idea or concept into a business situation where it has never been used.

Repurpose the proven.

Almost everyone working in supply chain has heard of Distribution Resource Planning (DRP). Did you ever wonder where idea for DRP came from? Well, from repurposing another concept. That’s when, back in the 1970’s, a young Andre Martin learned about the concept of a bill of material – a simple idea to calculate components and parts needed to produce a product.

Andre was struggling with how to better manage the flow of inventories between his distribution centres and factories. When he saw the BOM concept he got to thinking. Couldn’t he flip the concept and use it to calculate a bill of distribution?Sure he could. He repurposed the BOM idea and the rest is history.

A number of colleagues and business associates have complimented us on the Flowcasting process. Many refer to it as simple and elegant. Take a POS forecast, by item, by store and effortlessly transform it, apply simply calculations to it, until it speaks the language of the supply chain.

But the idea is not quite so brilliant and we’ve seen this movie before. Frankly it’s an extension of the idea of Distribution Resource Planning (DRP). The idea has been repurposed to extend the thinking and the logic to the store.

While it’s nice to hear people refer to Flowcasting as a breakthrough innovation and to us as innovators, you and I know the truth.

We’re really practical repurposers.

$500 Rule

Posted on March 7, 2014 by Mike Doherty

Have you every noticed that your views on things change when you’re forced to “put your money where your mouth is”? So, you really think that the Leafs will win the Stanley Cup? Wanna bet 500 bucks on that?

Brings you back to reality, doesn’t it? The same concept applies to demand planning/forecasting.

Bias (systemically forecasting too high or too low) is the #1 killer of good forecasts. The biggest problem with bias is its insidious nature – people often introduce bias into their forecasts with the very best of intentions. It may come as a result of being optimistic by nature. Or out of a desire to provide good service, you may feel compelled to add “a little bit extra” to your forecast, just in case.

You know that the demand forecast needs to be a realistic estimate of what you actually expect to happen. Everyone is planning on it. So how can you be sure that you’re not unintentionally killing your forecast with good intentions?

Use the $500 rule. What’s that?

$500 Rule: If you were forced to bet $500 of your own money that your forecast was as close to the truth as possible, would you keep it or change it?

Posted on February 27, 2014 by Mike Doherty

Two Dimensions of Demand Planning

Suppose you were guaranteed that a specific investment stock will increase in value by 50% but you weren’t told whether it will happen in 5 months, 5 years or 5 decades?

How much would this information be worth to you?

Not much, right? Why? Simple – you need to know both the percentage increase (quantity) and the timing (when). Demand planning is very similar. The purpose of the demand planning process is to anticipate how much of a particular product your customers will want and when they will want it. So, to do a proper job of demand planning, you need to consider two equally important dimensions:

quantity (how much?); and
timing (when?).

The purpose of the demand planning process is to predict BOTH the quantity and timing. You can’t have one without the other.

Big Data

Posted on July 10, 2013 by Mike Doherty

A slightly different perspective on Big Data, especially how it pertains to demand planning.

Forecasting for Fools

Posted on May 29, 2013 by Mike Doherty

Scott Armstrong is pretty knowledgeable about forecasting processes. In fact, he might be the world’s leading authority. Armstrong is a professor at the Wharton School of Business at the University of Pennsylvania. He’s dedicated his whole life (and he’s 74) to studying forecasting and his book, Principles of Forecasting, should be considered a bible to anyone interested in the field.

Us supply chain planners could learn a lot from old Scotty.

For example, one of his gems of wisdom is about complexity of the forecasting process/model. He states, “there’s been no case in history where we’ve had a complex thing with lots of variables and lots of uncertainty, where people have been able to make forecasting models or any complex model work. The more complex you make the forecasting process the worse the forecast gets”.

Hmmm…makes you wonder, eh?

We have entire companies and self-proclaimed experts who are advising companies about how to factor in Big Data, the weather, and a whole host of other variables, all with complex models aimed at sensing and translating and responding.

Maybe most of these folks are fools? After all, they are forecasting what should be calculated. And the farther away from the consumer you’re forecasting, the more variables and constraints you’ll need to try to factor in. Exactly Armstrong’s point.

Don’t be a fool.

Never forecast what you can calculate!